Mexican trucking issue rolls over U.S. exporters

   Many U.S. agriculture producers and manufacturers are losing significant export sales to Mexico because of tariffs that country imposed after Congress last year nixed a cross-border trucking program designed to fulfill free trade obligations, business groups said Tuesday.
   Representatives for the U.S. Chamber of Commerce, the National Association of Manufacturers and the National Potato Council expressed frustration on the one-year anniversary of the funding cutoff that the Obama administration has not addressed the safety concerns and restarted the pilot program after multiple promises to do so.
   “On trade, when you stand still you fall behind,” said John Murphy, vice president of international affairs at the U.S. Chamber, in a conference call with reporters. The business federation last September issued a report stating that failure to implement the trucking program has resulted in $2.2 billion in higher costs for U.S. consumers and companies, $232 million in lost exports and have resulted in more than 25,000 jobs lost or at risk.
   Moving ahead are Canadian companies, that are benefiting from import substitution by customers in Mexico seeking to avoid paying the high tariffs, industry officials said.
   Exports of frozen potato products fell 50 percent from April to December 2009 while Canadian exports rose by a similar amount, according to John Keeling, the head of the National Potato Council. Frozen French fries from Canada are now 20 percent cheaper than their U.S. counterparts.
   “We saw an immediate shift of shipments to Canada. And what we saw with potatoes we will see with other products,” he said.
   Obama administration officials said last spring they would quickly work to restructure the program that had allowed several dozen Mexican trucks to make deliveries in the interior of the United States. Congress, under pressure from the Teamsters union and public safety groups, terminated the program citing safety concerns with Mexican trucks and drivers on U.S. highways. After Congress killed the program, Mexico retaliated by slapping tariffs of 10 percent to 45 percent on 90 U.S. exports ranging from pears to shampoo, Christmas trees and cordless phones. The Mexican tariffs apply to $2.4 billion in exports per year.
   Under the North American Free Trade Agreement in 1994, the U.S. agreed to allow Mexican trucks into the country within three years, but Congress has repeatedly blocked their entrance. Mexican trucks are only allowed to shuttle goods into a 20-mile border zone where they are transferred to other companies for long-haul transport throughout the United States.
   Mexico is the second largest U.S. export market.
   Last week, 56 Republicans and Democrats in the House of Representatives wrote Transportation Secretary Ray LaHood and U.S. Trade Representative Ron Kirk to resolve the matter as quickly as possible because their constituents were suffering from the tariffs. The signatories included several lawmakers who previously have not been big supporters of free trade.
   LaHood recently testified that the plan for Mexican truck access has taken a long time to prepare because it requires extensive consultation and approval from at least five different departments, as well as negotiations with the Mexican government. The Department of Transportation intends to soon present a final plan to Congress for review, he said.
   President Obama’s recently stated goal to double exports within five years is being undercut by a trade dispute that is slashing exports in half for some products, Murphy noted. He acknowledged there have been difficult bureaucratic and diplomatic hurdles to overcome, but added: “It has been a full year now and the costs have been escalating and we need to get on with it.”
   The value of California table grape exports to Mexico fell 70 percent in 2009 to $18.7 million from $60 million in 2008 under the weight of a 45 percent tariff, according to Keeling.
   Chemicals, paper and printed products, machinery and dog and cat food are among the products that have been hit hard by the tariffs, said Doug Gowdy, director of international trade policy for the National Association of Manufacturers.
   U.S. manufacturers are concerned about competitors in Colombia, Central America and China bumping their products from the Mexican market, he said.
   Glatfelter, a manufacturer of specialty paper and engineered paper products based in York, Pa., has lost almost all its $10 million book of business with Mexico, Gowdy said.
   Industry officials said job losses are expected to worsen in 2010 because many companies that ate the tariff’s cost the first year will no longer be able to do so and will relocate plants to Canada and elsewhere.
   “We’ll see the loss of the other 50 percent of our market share in the next 10 months if nothing is done,” Keeling said.
   A major frozen potato processor in Idaho recently closed a line for several economic reasons, including the tariffs, and growers are beginning to shut down potato acreage and move crop production to Canada, he added.
   The reduction in frozen French fry production is also causing a glut on the fresh potato market and depressing prices for farmers.
   Two independent reports on the pilot project demonstrated that the Mexican trucks were just as safe as their U.S. counterparts operating on the highways, Murphy noted. There were 46,000 crossings without a major incident and the rigs “were probably the most inspected in the world,” he said.
   Keeling said the Teamsters union, in its effort to preserve jobs for American truckers, has contributed to job losses because shipments that used to be hauled to Mexico from the United States are now moving south on Canadian trucks.
   The funding cutoff officially expired at the end of 2009, meaning the administration technically has a window to move forward with the program. It is not expected to do so without getting a green light from Congress so that a termination procedure isn’t repeated. — Eric Kulisch